I am devoting a portion of this week’s column to ascertaining what purchasers, sellers, and investors’ concerns are in our local Long Island market.
The following are choices in determining how you would rate your concerns about the current real estate market and where you might place your money whether you choose to stay put where you are, go into a rental, or consider moving out of the area to a lower priced location or state or lastly to buy an investment property for cash flow. Choose the top 4 in the order of most to least in importance to you:
1.) Interest rates
2.) Lack of inventory to choose from
3.) Rental prices
4.) Staying in place and saving more for a down payment
5.) Fear of purchasing at the height of the market
6.) What is your biggest concern right now:
A.) Buying your primary home
B.) Buying an investment property for cash flow
C.) Investing in the stock market
I would hope my readers will respond and provide me and other readers with a view of the pulse of our local market in a future column. So please email them back to me in the order that you feel is most concerning in either buying, selling or investing.
Real estate is considered more of a local event. What happens here on Long Island can be much different compared with Down South, Middle America, and Out West, and can have varying degrees of the strength and weakness of their particular markets. As an example, inventory in San Francisco increased 32% year over year in June as per Realtor.com. Los Angeles Metro Area saw housing inventory slightly accelerate with September price increases of 2.7% year over year, but 2% lower from August 2022. Sales in Los Angeles County contracted 31.7% year over year.
Due to the excessive increases in interest rates, Nevada, Colorado and Texas have seen much slower sales contributing to increased inventory year over year and the slowing of the market for new homes. Moreover, due to higher costs of construction and supply chain issues, developers have also pulled back. Having déjà vu of 2008, they have pulled back due to the fear of getting stuck with unsold homes with looming memories of the past.
In Long Island, however, there aren’t as many areas where land is readily available to build new homes, so inventory is much more restricted and will take many years to reach normal levels of six to seven months. Due to the still fairly strong demand, the median sale price of homes sold on Long Island in the third quarter hit a record of $620,000 as per the Multiple Listing Service. This was a 6% increase year over year.
Available inventory is still at 3.1 months, meaning it would only take that long to sell all the available homes currently on the market. Listing inventory fell 6% compared to 2021 and sales fell 16% compared to the same time period. Those who had prior lower interest rate commitments were fortunate and lucky with their timing and purchases.
Most important, Suffolk County had established a Land Trust, which was the first in the nation, and New York State has been securing and purchasing more and more farmland to keep as protected non-buildable spaces, and for the last 40 years up until 2018 Suffolk had acquired or restricted 10,000 acres of farmland from doing any residential construction.
With inventory as tight as it is and the lack of buildable land, many are knocking down homes to build new ones. Prices therefore will not crash but may moderate as interest rates increase again and this may dampen demand in the fourth quarter, especially for investors who are most concerned with the return on investment. The continued demand from millennials and Gen Zs for those whose incomes have increased and those Baby Boomers who want or need to downsize and are able to stay local may just keep our market going through 2023.
But realistically with all that is occurring, with inflation, energy issues, supplies of goods and services, and the continued war in Ukraine, the results of our midterm elections will determine the future effect on our economy. It is unknown what future domestic and world events might affect and deter buyers and sellers; it’s all a guessing game and prognostication. Some will be right and many will be wrong, but we’ll hope and pray for the best outcome.
Veterans Day is Friday and we should remember their sacrifices and always thank them for the freedom and life that they have allowed us to live in the U.S.
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